REVIEW: Demand and Supply

MULTIPLE CHOICE

For items 1-3, refer to the graph below

1. The equilibrium price and quantity in this market will be:

A) $1.00 and 200.

B) $1.60 and 130.

C) $.50 and 130.

D) $1.60 and 290.

2. A surplus of 160 units would be encountered if price was:

A) $1.10, that is, $1.60 minus $.50.

B) $1.60.

C) $1.00.

D) $.50.
3. A shortage of 160 units would be encountered if price was:

A) $1.10, that is, $1.60 minus $.50.

B) $1.60.

C) $1.00.

D) $.50.

For items 4-5, refer to the graph below

4. A decrease in quantity demanded (as distinct from a decrease in demand) is depicted by a:

A) move from point x to point y.

B) shift from D1 to D2.

C) shift from D2 to D1.

D) move from point y to point x.

5. A decrease in demand is depicted by a:

A) move from point x to point y.

B) shift from D1 to D2.

C) shift from D2 to D1.

D) move from point y to point x.

TRUE or FALSE
__1. Price floors and price ceilings distort the efficient allocation of resources. T
__2. Demand refers to the amount buyers wish to buy, whereas the quantity demanded refers to the
position of the demand curve. F
__3. A decrease in the price of a complement will shift the demand curve for a good to the left. F
__4. A movement along a demand curve is called a change in demand while a shift of the demand curve
is called a change in quantity demand. F
__5. When a seller expects the price of its product to decrease in the future, the seller's supply curve
shifts left now. F
__6. At prices below the equilibrium, there is an excess quantity supplied, or surplus. F
__7. Price floor is the minimum legal on the price at which a good can be sold.
__8. A movement upward and to the right along a given supply curve is called an increase in supply. T
__9. At market equilibrium, it is correct to say that supply equals demand. F
__10. If there is an increase in the number of sellers in the market, then the supply curve for that good
will shift to the right. T
__11. If a person expects the price of rice to decrease next week, then that person’s current demand for
rice will increase. F